Campbell Inc. produces and sells outdoor equipment. On July 1, 20Y1, Campbell issued $30,000,000 of 10-year, 10% bonds at a market (effective) interest rate of 9%, receiving cash of $31,951,110. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.
Required:
1. |
Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 20Y1.* |
2. |
Journalize the entries to record the following:*
a. |
The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.) |
b. |
The interest payment on June 30, 20Y2, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.) |
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3. |
Determine the total interest expense for 20Y1. |
4. |
Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? |
5. |
Compute the price of $31,951,110 received for the bonds by using the present value tables. (Round to the nearest dollar.)
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*Refer to the Chart of Accounts for exact wording of account titles. |
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